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Compliance: How to comply with the new BEE codes - Part 2

BEE codes

In last week's article on the recent changes to the BEE codes, I outlined why the codes have been redesigned and the compliance areas the new BEE codes focus on. Here are five more changes that are critical for you to know about because you'll need to show compliance with these.

1. The qualifying criteria for EMEs and QSEs have changed

To qualify as an exempted microenterprise (EME), under the old BEE codes the turnover threshold used to be R5 million. Under the new codes, it's R10 million. To become a qualifying small enterprise (QSE), says Richard Pruett of Format Systems, you now have to turnover R50 million whereas previously, you only had to turnover R35 million. QSEs will eventually have their own scorecards but these haven't been published yet.

2. Any QSE or EME that is 51% black owned is automatically level 2

If either one of these entities is 100% black owned, they are automatically level one. To verify their BEE levels, in theory all they need to do is to go to a police station – with their company registration documentation – and make out an affidavit and they'll automatically be regarded as level 1. "This," says Richard, "is being challenged because this process is ripe for corruption."

3. The pillars in the new BEE codes have been reduced

In the old codes, there were seven pillars that you had to comply with. This number has been reduced to five.

The concept of 'priority pillars' has now been introduced. What this means is that to attain any BEE level, you need to show compliance with these pillars, which are:

1. Ownership,

2. Skills development, and

3. Enterprise and supplier development.

Says Richard: "A lot of companies in the past said: 'Oh, we're not going to worry about ownership compliance. We'll get our points in CSI, preferential procurement and things like that'." He cautioned that you can't use this loophole anymore.

4. Being a 'value-adding' supplier will no longer get you anywhere

With the old BEE codes, if you were a 'value-adding' supplier, you would get an extra 10 points. This is no longer possible. To get extra points, you have to become an 'empowering organisation'. A problem that's been raised with the Department of Trade and Industry (dti) is that if a company is automatically a level 1 supplier on the grounds of ownership, there's nothing to encourage an organisation such as this to comply with the other pillars in the BEE codes.

5. The number of qualifying points for each level has changed

"It's going to be very difficult for any company to maintain their BEE level," concludes Pruett.